Last week saw a trickle of activity for publicly placed primary deals, although most deal flow continued to be driven by retained or pre-placed transactions.
The good news is that market players remain optimistic that some appetite will return in the New Year. For now, deal flow is still affected by the market-wide liquidity problem fueled by the tough cash market environment.
Deals pricing last week offered generous levels, but despite the value, market sources said investors remained tepid. "The tone in the financial markets improved appreciably over the past week, fuelling a rally in corporate (including financials) stocks and credit," Deutsche Bank analysts said. "Yet bank funding channels remain thin with wholesale markets in turmoil. Term markets such as the covered, securitized and unsecured bond markets are effectively shut off for now while the run on the short-term financing markets (interbank especially) continues unabated."
Dealers released pricing details for Mansard Mortgages 2007-2, the GBP550 million ($1.11 billion) U.K. RMBS originated by Rooftop Mortgages Ltd. Bear Stearns and the Royal Bank of Scotland were co-leads on the deal. At the senior level, the 2.1-year Class A1 notes priced at 65 basis points, and the 6.3-year Class A2 tranche came in at 80 basis points. The double-A-rated 4.3-year Class M1 notes priced at 125 basis points, the single-A-rated 4.3-year Class M2 tranche priced at 200 basis points and the triple-B-rated Class B1 and double-B-rated Class B2 tranches came in at a discount margin of 400 basis points and 600 basis points, respectively.
Standard Life Bank also priced its 700 million ($1.02 billion) single-tranche RMBS, Lothian 2007-1. The deal was also led by the Royal Bank of Scotland. The triple-A-rated 1.3-year Class A notes priced at 50 basis points but, as is the dominating trend of late, the notes were retained.
Delta Lloyd priced its Arena 2007-1, the 650 million partly NHG-guaranteed Dutch RMBS. ABN Amro and the Royal Bank of Scotland are co-leads on the deal. The capital structure comprises a 350 million triple-A-rated 4.7-year NHG-guaranteed tranche, which priced at two basis points, and the triple-A-rated 5.1-year Class A notes, which priced at 50 basis points. The double-A-rated 6.9-year Class B tranches priced at 75 basis points, the single-A-rated 6.9-year Class C notes at 110 basis points, the triple-B-rated 6.9-year Class D tranche at 200 basis points and the split-rated Class E notes at 250 basis points. The NHG-guaranteed tranche was sold, but other tranches was retained.
Details were revealed on another retained Spanish transaction, Grupo Banco Populare's Empresas 2, the 2.5 billion securitization of unsecured loans granted to Spanish large companies and SMEs. The triple-A-rated five-year notes were priced at 25 basis points, the single-A-rated 6.2-year Class B tranche at 50 basis points and the triple-B-minus-rated Class C notes at 90 basis points.
But despite the modest rise in activity, it looks like the year won't end with a bang. By this time last year, primary volumes had already reached 40 billion. Volumes to date are nearly 71% lower than the end of the 3Q06, and the end of 2007 will be no match for last year's December rally, which saw 56 billion printed in the last three trading weeks.
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